I would like to know what bank should and shouldnt do to avoid this crisis in the future.As the matter directly affect the US stock market and also the contagious to other part of the world.

Don't loan money on half million dollar homes to people on welfare?

the lesson is "if something seems to good to be true...you should probably stay away from it"

In my opinion this type of thing will continue to happen, perhaps not in the residential mortgage industry next time but somewhere.The sub primes mess is a product of Wall streets' voracious appetite for AAA rated investments that were not really AAA rated. Wall street was buying so fast during the real estate boom that Banks created products for more and more people to get loans to in turn sell more to Wall street. For a while everything was fine because real estate was rising fast enough in value to stem the tide of delinquincies. Someone blinked and it all came crashing down.We had the RTC in the 90's, the tech bubble burst in 2000, 1% fed rates and now this. It is a cycle that will continue.

The whole thing is odd. The banks had to know that this was the likely scenario, yet many didn't stop it. I think that there's some strange politics here that go beyond simple greed, but greed was probably the primary factor for many. Some banks have behaved responsibly, and aren't as prone to the fallout. The lesson? Don't help people make foolish choices by giving them easy credit?

Lesson: There will always be a "crisis" in the stockmarket, Dot.com bubble, Enron, et al, sub-prime. Go back in time & every half dozen years or so, there was some kind of investor rip-off.Avoid it in the future: The same way one avoids the common cold...

Its sad to write everyone has to suffer for the actions of a few. In other words, "One bad apple spoils the whole bunch."At least three ways to severely reduce this situation from happening again:1[ Actually licensing individuals who get in the real estate, banking and mortgage businesses - AND the businesses and institutions those folks work for.2] Mandatory Continuing Education - known as "M.C.E. at ALL levels. 3] Before performing the acts, making license fees and penalties so high, folks will have to think three, four or more times.HOWEVER, the world has not-so-ethical doctors, attornieys and other professionals - at all levels, doesn't it?Thanks for asking your Q! I enjoyed answering it!VTY,Ron BerueYes, that is my real last name!

The real problem was with the Fed cutting down to 1% after 9/11 which precipitated way below normal interest rates for mortgages. What you can do in the future is wait for the rates to get down under 2% because it will happen again and we'll have this cycle all over again.